Earnings Preview: Zumiez Inc. - Analyst Blog

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U.S. Specialty retailer in action sports related apparel, footwear, equipment and accessories, Zumiez Inc. ( ZUMZ ) will release its fourth-quarter and full-year 2011 results on Thursday, March 8, 2012.

The current Zacks Consensus earnings per share ( EPS ) estimate for the fourth quarter is 59 cents, representing an increase of 20.3% from last year. The Zacks Consensus Estimate for full-year 2011 stands at $1.18 per share, reflecting a year-over-year growth of 34.4%.

The company has continually delivered positive earnings surprises, outplaying the Zacks Consensus Estimate in the past four consecutive quarters. Zumiez's third quarter witnessed a positive surprise of 9.8%. The company's average surprise for the trailing four quarters comes to 68.5%.

Third-Quarter 2011 Recap

Backed by strong merchandising, new store opening and e-commerce strategies along with improved margins, Zumiez Inc. reported a strong third-quarter 2011 result. The quarterly earnings of 45 cents per share beat the Zacks Consensus Estimate of 41 cents and surged 12.5% from the prior-period level of 40 cents.

Net sales in the reported quarter climbed 13.3% to $154 million from $135.9 million a year ago. Comparable store sales rose 6.0% in the quarter compared with an increase of 14.4% in third-quarter 2010. Moreover, total revenue also surpassed the Zacks Consensus Estimate of $153 million.

Guidance

Zumiez raised its sales and earnings guidance range during the release of December 2011 comparable sales result. The company raised its fourth-quarter 2011 sales guidance in the range of $180 - $181 million from $174 - $177 million forecasted earlier.

Moreover, based on the prediction of a high-single-digit growth in comparable store sales, Zumiez now expects fourth-quarter 2011 earnings to be in the range of 57 cents to 58 cents per share, instead of the previously announced guidance range of 52 cents to 54 cents.

Agreement

Of the 14 analysts providing the estimates, only one analyst revised its fourth-quarter estimate upward in the last 30 days. There was no downward revision witnessed in the 30-day period. None of the analysts either raised or lowered their estimate in the last 7 days. For fiscal 2011, 1 out of 17 analysts raised the estimate in the past 30 days, with no downward revisions in the same period. In the last 7 days, analysts kept their estimates intact with no movement in either direction.

For fiscal 2012, 9 out of 17 analysts raised their forecasts in the last 30 days, while none of them slashed estimates. In the last 7 days, estimate revision trends were similar to the 30-day period with 9 analysts raising estimates with no downward revisions.

Magnitude

Estimate revisions by analysts point to an upside in the Zacks Consensus Estimates for all discussed time periods. With one analyst moving up estimates, the Zacks Consensus Estimate for the fourth quarter upped by a penny to 59 cents per share in the last 30 days. Over the last 7 days, fourth-quarter estimates remained stable with no movement in analyst estimates.

Despite one upward movement in analyst estimate for fiscal 2011, in the last 30 days, estimate remained intact at $1.18 per share. In the last 7 days, the estimates were stable with no revision by analysts. For fiscal 2012, 9 analysts upped their estimates in both the 30-day and 7-day periods, bringing the Zacks Consensus Estimate up by 2 cents to $1.40 per share for both periods.

Our Take

Everett, Washington-based Zumiez targets young men and women in the age group of 12 to 24 years, who seek popular brands that represent a lifestyle centered on extreme sports activities. We expect Zumiez's focus on teenage action-sports based merchandise and expanding store network to deliver solid performance in the upcoming quarters.

Zumiez's stores span across 2,900 square feet on an average, and feature couches and video game stations to entice customers to shop for extended periods. These stores are strategically located near busy areas of the mall, such as food courts, movie theatres, music/game stores and other popular teenage hang-out destinations. As of February 25, 2012, the company operated 434 stores in the United States and 10 stores in Canada.

We believe Zumiez's niche focus on teenage action-sport based merchandise, commitment toward store expansion and a healthy balance sheet augur well for future operating performance.

However, intense competition from other specialty retailers like Hot Topic Inc. ( HOTT ) and Pacific Sunwear of California Inc. ( PSUN ), seasonal nature of the business and risks associated with sourcing merchandise from foreign countries may weigh upon the company's results.

Currently, Zumiez holds a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock. However, we retain our long-term 'Neutral' recommendation on the stock.


 
HOT TOPIC INC ( HOTT ): Free Stock Analysis Report
 
PAC SUNWEAR CAL ( PSUN ): Free Stock Analysis Report
 
ZUMIEZ INC ( ZUMZ ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: EPS , HOTT , PSUN , ZUMZ

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